The pandemic has intensified a digital arms race as companies and countries compete to foster the innovation that can provide jobs and prosperity for the future. Scale is critical and many countries worry about keeping pace with China and the United States, with their massive domestic markets and tech giants.
This pressure is felt with urgency in the United Kingdom, where the government sees high-tech industries as critical to its post-Brexit/post-pandemic strategy. Reports this year have focused on ways to promote the growth of fintech and the life sciences industry, including changes in stock exchange listing requirements, new financing vehicles, and harnessing the state-run National Health Service to accelerate medical breakthroughs.
“The common denominator is the word ‘tech,’” says Ron Kalifa, an entrepreneur who ran payments company Worldpay for a decade and led an independent review of the fintech sector for the UK Treasury. “There’s a significant growth potential for UK health-tech and other emerging tech sectors, and much of what we’ve done to support our fintech ecosystem could and should be applied to those areas.”
“What we’re trying to do in life sciences is replicate the success of COVID, which was essentially mission-driven collaboration,” says Sir Jonathan Symonds, the GlaxoSmithKline chair who advised the government on a proposed 10-year strategy to bolster the life sciences sector and produce breakthroughs on diseases including cancer and dementia.
Kalifa and Symonds discussed the challenges and opportunities of tech innovation with Rupal Kantaria, a partner at the Oliver Wyman Forum.
The UK has a vibrant fintech sector, but the rest of the world is catching up. What are the key challenges facing the sector?
Kalifa: Access to qualified and suitable talent remains one of the biggest challenges. Tech is second in importance in the UK labor market only to healthcare. There are nearly three million jobs in our digital economy. And unlike many other sectors, tech roles in the UK have seen something like a 36% uptick since June 2020. Currently the demand for digital skills outweighs the supply. The challenges span both domestic skill shortages and the need to access foreign talent seamlessly. So in the fintech review, we’ve proposed the creation of a new fast-track visa, a recommendation the government has embraced, and I think it will be used as the basis for a broader tech scaleup visa.
Another area of challenge was investment. We’ve got an incredible pipeline of tech companies that are scaling rapidly in the UK. We’ve got to respond accordingly to provide them with suitable opportunities for growth. We’ve proposed a series of changes to our listing regime. This is about updating the rules around free floats and dual-class share structures to attract more founder-led and high-growth companies to the UK. If adopted, I think they’ll ensure that the UK can remain a competitive and a dynamic market, not just in terms of businesses but for jobs and for levelling up.
To what extent does the life sciences sector share similar challenges?
Symonds: The fundamental opportunity we have is the ambitious creation and adoption of technology. It is quite clear that if the National Health System in the UK has to move from providing chronic support or late-stage interventions, we’ve got to move to a system where we can predict who’s going to have the highest incidence of disease. We’ve got to be able to diagnose early, and we’ve got to put advanced technology – whether it’s therapeutics or diagnostics – to a point where we can intervene early and significantly change the course of the disease.
The major theme of our report is to transition the NHS to become a co-creator and early adopter of technology, so we can build clinical trials and use the UK data network to accelerate innovation. Otherwise, US markets will always have an attraction over the UK that is very difficult to compete with.
The world is awash in capital yet both of you say the UK lags the US in attracting tech investment. What can we learn, and what are the stumbling blocks?
Kalifa: We don’t have a challenge in terms of startup capital, but we do have a challenge in terms of scaleup capital. Many promising and fast-growing companies tend to struggle to access the capital they need to achieve their potential. So although the UK ranks third in the world for starting a business, it only ranks 13th when it comes to scaling them. That gap’s arisen from long-term structural issues. These include a deficit on patient institutional capital flowing into this market segment and a lack of dedicated funds for the sector.
The review proposed the creation of a one billion-pound fintech growth fund that would be market-led and financed by domestic institutional capital. It would not only create a channel for private investment capital, but I think it’s also got the potential to unlock defined-contribution pension money. What’s vital to understand is that the capital is already here. There’s six trillion pounds in UK private pension plans alone, and 1.6 trillion pounds of investments from British insurers is already exposed to technology assets.
Symonds: The challenge of life sciences is that the UK represents four percent of the global market, the US represents 50%. Anybody who starts the innovation process in the UK will always want to succeed in the US. So if the UK doesn’t offer competitive and attractive access to capital, then it’s going to flow to the US. When you look at the ecosystems that have been built in Silicon Valley or Boston, it is completely seamless in the creation of innovation, the startup of innovation, the scaleup of innovation, and the listing on Nasdaq. We have to have this continuum in the UK.
We need to go through a collaborative process between City of London institutions and life sciences institutions. This is a seriously regulated industry and binary outcomes, where investment can be completely lost, are entirely feasible. We have to not only build the inherent skills and capability, the investing track record, but also create an acceptance of the risk appetite. This is a five- to 10-year capability build that we have to go through.
What role does data play in fostering innovation, and what’s needed to facilitate this?
Symonds: The essential component of any successful future life science industry in the UK is the combination of science and data. The UK has this unique data network that tracks every element of healthcare, from birth to death, through the NHS. It creates a closed system of 55 to 60 million people. This is the richest source of data in the world. The challenge is that we’ve got to demonstrate to everybody that this data can be protected, it can be trusted, and it can be used for the benefit of individuals.
We need to become the leader in computational biology. Alongside the NHS, the national data asset is what will create the UK as the next Boston or the next Silicon Valley as we move into the new phase of digitally enhanced life sciences. The prize is enormous.
What role should digital ID play in promoting technological innovation?
Kalifa: There’s something like one billion people around the world who have no formal way of providing any information or proving who they are. In many cases this means that they struggle to secure basic services, including access to healthcare, education, and finance. Digital identity that’s universally accepted needs to be the cornerstone of future economies and key to driving inclusive growth.
I think our government has made some fairly impressive progress towards building a trust framework for a digital ID system and has already received impressive amounts of international traction. But it will be up to the creative and innovative drive of industries to actually build and develop these services. It’s my view that if we can bring private providers of all types together with policymakers, with regulators, with investors, with consumer groups, I think we will be able to accelerate the progress toward successful digital ID solutions, partnerships, and products.